Massachusetts State Regulations & NAIC Insurance Law
Licensing
Any individual applying for a Massachusetts resident producer’s license must be at least 18 years old and must be a resident of Massachusetts before submitting an application.
Pre-licensing course and exam: Not required
Massachusetts does not have specific requirements for pre-licensing materials.
Fingerprints/background check
As part of the application process, you must submit fingerprints to the Massachusetts Division of Insurance. Plan to get fingerprinted after passing the state exam and at least one day before applying for the license.
Controlled business
Controlled business is insurance written primarily in the interest of the producer or the producer’s family members. Producers are prohibited from obtaining a Massachusetts insurance license for the purpose of writing controlled business.
You may sell a policy to yourself or your family members, but you may not obtain a license solely for that purpose.
Non-resident license
A licensed producer must meet the following requirements to obtain a nonresident license:
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The individual must hold a resident license in their home state and be in good standing.
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The individual must complete the appropriate application and submit the required fees to the insurance Division/commission in each state they wish to become licensed in.
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The individual’s home state must offer equal reciprocity for the state you are attempting to obtain a non-resident license in. Currently, Massachusetts has reciprocation agreements with all other states.
Temporary license
A Temporary Producer license is valid only if the temporary producer is sponsored and appointed by an insurance company. A Temporary Producer license is a once-in-a-lifetime license per line of authority and is valid for a maximum of 6 months from the date the license is issued.
Inactive status
A Massachusetts resident producer who is ordered to active military duty may place their license on inactive status until discharge. While a license is inactive, the producer may continue to receive residual (“trailing”) commissions, but may not solicit or transact any new business.
Renewal maintenance
Massachusetts insurance licenses are issued for a term of up to 3 years. A producer must renew their license every 3 years, by the last day of the licensee’s birth month. Because renewal is tied to the birth month rather than the issue date, an initial license may run for less than a full 3 years before its first renewal.
A renewal fee received after the due date carries a penalty of double the unpaid renewal fee. Once a license lapses, all company appointments held before the lapse are canceled.
A producer may reinstate their license within 12 months of the renewal due date without having to retake the licensing exam. If a former producer has been without a license for more than 12 months, they must take the pre-licensing course, retest, and get fingerprinted before applying for a new license.
Continuing education
All states, including Massachusetts, have continuing education requirements that must be met to renew any major lines (life, health, property, liability) insurance license. Individuals licensed in Massachusetts must complete 60 hours of approved instruction before their first license renewal, and 45 hours for each subsequent 36-month renewal period. Three of those hours must be Massachusetts Approved Ethics (MAE), counted within the total rather than in addition to it. The hours may be earned in any line of insurance the producer is licensed for.
Notice of change of name or address
Any change of name or address (residential or business) must be reported by the licensee to the Massachusetts Division of Insurance within 30 days of relocation. Failure to do so may result in monetary fines and/or suspension of a license.
Company regulations
An insurance company must be authorized by the Division of Insurance to conduct business in Massachusetts. To receive authorization, the insurance company must present its rate tables and articles of incorporation (including the nature and purpose of the company’s business intentions), along with the appropriate corporate bylaws and required fees.
Place of business
Every resident insurance producer authorized to conduct business in Massachusetts must maintain a place of business (with public access) within the state.
Capital and surplus requirement
A company authorized to conduct insurance business in Massachusetts must meet minimum corporate standards. The certificate of authority allows the insurer to conduct business in the state only if it maintains the minimum capital or permanent surplus required.
Medigap policies
To reduce confusion about the many types of Medicare supplement policies available, federal law requires national standardization of Medigap policies. Insurers must offer a limited number of standardized Medigap plans developed by the NAIC.
Currently, the available plans are A, B, C, D, F, G, K, L, M, and N. Plans E, H, I, and J have been eliminated. In addition, Plans C and F are not available to individuals who became newly eligible for Medicare on or after January 1, 2020.
Plan A includes the “core” benefits (Parts A and B co-payments, 365 additional days of hospitalization, and the first 3 pints of blood). If an insurer sells any Medigap policies in the state, it must offer Plan A.
A Buyer’s Guide and an Outline of Coverage are delivered at the time of application, before accepting any premium payment.
Duties of the commissioner of insurance
The Massachusetts Commissioner of Insurance is the head of the Division of Insurance, which is part of the Massachusetts Office of Consumer Affairs and Business Regulation (OCABR). The Division of Insurance regulates the insurance industry and protects consumers. The Commissioner of Insurance is appointed by, and serves at the pleasure of, the Governor.
The Commissioner is responsible for establishing and enforcing regulations in the Massachusetts insurance market in a manner that protects consumers and encourages economic development.
Those duties include:
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Investigate all claims and complaints of legal violations relating to insurance.
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If the Commissioner finds that laws have been violated, their findings and supporting documents will be forwarded to the state attorney general to pursue prosecution.
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Monitor transactions of all companies including domestic, foreign, and alien insurance companies.
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Audit the books and records of all Domestic insurers at least every 3 years.
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Audit the books and records of any resident producer as frequently as necessary.
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Collect all fees associated with producers and insurers.
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Determine and administer fines associated with violations for insurers and producers.
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Issue reports pertaining to the suspension and revocation of licenses of producers and certificates of authority for insurers.
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Approve documentation used by insurance companies such as forms and rates.
Suspend, revoke or non-renew
The Commissioner has the authority to suspend, revoke, or refuse to renew a license for:
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Providing false information on the application for an insurance license.
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Omitting any relevant information on an application that would have disqualified the individual from being eligible to receive a license.
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Being found guilty of a violation or the noncompliance of insurance regulations and laws…
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Committing fraud while attempting to obtain an insurance license.
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Commingling policy owners’, insurers’, and beneficiaries’ money with the producer’s own money.
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Providing false information in reference to the terms and conditions of an insurance contract.
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Having been found guilty of a felony (or misdemeanor involving activities related to the individual’s moral character.)
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Having been convicted of violations in reference to unfair trade practices or fraud.
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Having engaged in activities of a fraudulent nature which allowed the person to involve themselves in dishonest, coercive, untrustworthy, and financially irresponsible practices.
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Having had a prior insurance license revoked or suspended in a state other than Massachusetts.
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Using another person’s identity and forging their name on an insurance application.
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Being found guilty of using unethical practices or cheating on an examination for an insurance license.
Cease and desist
If the Commissioner believes that a producer has (or is about to) violate any insurance regulation in Massachusetts, they may issue a cease and desist order. A cease and desist order does not suspend or revoke the recipient’s registration, but it does require the recipient to stop or limit the activity addressed in the order.
Hearing
A recipient of a cease and desist order must comply immediately. However, actions taken by the Commissioner are not “final and binding.” Any Massachusetts resident producer subject to disciplinary action has the right to request a hearing to discuss the merits of the situation.
The Commissioner also has the authority to investigate any producer doing business in Massachusetts to determine whether a hearing is required. If sufficient evidence is found, the Commissioner will issue a notice with the date and time of the hearing. This notice will be sent to interested parties at least 20 days before the hearing.
If a hearing results in a finding of a known violation of Massachusetts insurance law, the Commissioner may, in addition to issuing a cease and desist order, impose a civil penalty of up to $15,000 per violation.
Unfair claims settlement practices
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The intentional obstruction and delay of claims payment or the delay of a claims investigation is a violation of regulation.
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Neglecting to provide a prompt response and written explanation of insurance policy terms, conditions, and laws related to the contract are examples of unfair claims settlement practices.
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Failure to provide claims without launching a thorough investigation is a violation of regulation.
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Making settlement claims based on information contained on an application that has been altered without the insured’s consent is a violation of regulation.
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Denying a claim without conducting a thorough investigation.
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Attempting to settle a claim for less than fair market value.
Policy forms
Massachusetts is a “file and use” state. A file and use filing is a submission that must be filed with the Division, but the insurer may begin using it as soon as it is filed. The insurer does not have to wait for Division approval before using it.
A file and use filing does not mean an insurer can submit anything it wants. The submission must still comply with the Law, Regulations, and Bulletins.
If the wording on a health insurance policy (or other form) conflicts with Massachusetts state law, the policy will be amended to minimum conformity with state statutes.
The amount of interest that may be charged on a life insurance policy loan is also regulated by state law, and policy provisions must comply with these statutory limits.
Record maintenance
Complete and accurate records must be kept at the producer’s place of business for a minimum of 3 years. The records must show every contract placed, the named insured, changes or amendments, and premiums received with each transaction. Records may be inspected at any time by the Division of Insurance or any representative appointed on their behalf.
Fraudulent producer representation
An insurance producer who represents to the public that they are licensed to conduct insurance business in Massachusetts, but has not passed the appropriate licensing examination, is in violation of regulation. This includes any public communication, such as advertisements, letterheads, circulars, business cards, and other methods of representation.
A producer found guilty of conducting business in Massachusetts in any line of insurance for which they are not properly licensed may have any other insurance license suspended or revoked.
Misrepresentation
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Misrepresentation involving the creation or distribution of policies, quotes, and illustrations designed to provide inaccurate information about the terms and conditions of a policy is prohibited.
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Providing inaccurate or incomplete information or comparisons regarding the benefits of a policy is an example of misrepresentation.
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Providing inaccurate or incomplete information with the sole purpose of inducing lapse, exchange, conversion, forfeiture, or surrender is a violation as well (twisting).
False advertising
Communication involving the publication of newspapers, magazines, radio, or television that is intended to deliver false information in reference to insurance is a violation of NAIC regulation.
Defamation
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The intentional and malicious circulation of written or oral information intended for the direct or indirect dissemination of derogatory statements is prohibited.
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Publishing and circulating inaccurate information regarding the financial condition of an insurer, person, or competitor in the insurance industry is a violation of NAIC regulation.
Boycott, coercion and intimidation
Participation in any boycott or activity involving coercion and intimidation for the sole purpose of retaining business, or that results in a monopoly of insurance business, is prohibited.
False financial statements
Any licensed producer who makes false statements containing any information that involves inaccurate material facts or false statements on an application for insurance is in violation of NAIC regulation.
Illegal inducements
In Massachusetts, it is prohibited to induce the purchase of insurance by offering anything with a monetary value in excess of $10. It is also prohibited to accept anything with a monetary value in excess of $10 from a client. Any producer participating in this activity is subject to suspension of their license and a monetary fine.
Unfair discrimination
Discriminating on the basis of class, race, marital status, or sexual preference is a violation of regulation. Any unfair discriminatory practices intended to directly or indirectly favor an applicant or insured are prohibited. Denying insurance coverage based on the blindness or partial blindness of an individual is considered discrimination and is a violation of NAIC regulation.
Errors & omissions
Errors & Omissions (E&O) insurance is a type of professional liability insurance that protects insurance agents if they are sued for negligent performance of their duties. E&O covers negligence and unintentional mistakes that cause financial harm to clients. It does not cover intentional misconduct, criminal acts, or regulatory fines.
Children covered as dependents
Newborn children must be covered as a dependent from the moment of birth by their parent’s policy. Adopted children (even unborn) are covered by the adoptive parent’s policy from the moment the adoption becomes legal. The newborn or newly adopted child may be enrolled within 30 days without any pre-existing condition limitations.
A dependent child may remain on a parent’s policy until age 26, regardless of student status. However, a mentally or physically handicapped child (any age) can be covered as a dependent on their parents policy until they become self supporting.
Rebating
Massachusetts licensed producers are prohibited from directly or indirectly giving any refund, discount, favor, or credit to reduce premiums to induce the purchase of insurance.
Furthermore, producers in Massachusetts are also prohibited from receiving any payment for the sale, solicitation or negotiation of insurance outside of commissions and/or salary.
Sharing commission
The splitting or sharing of commissions with a licensed producer is allowed. Both parties must be licensed in the line of business in which the proposed commission is to be split.
Twisting
Providing false information or expressing derogatory ideas about the financial conditions of a competitor company with the intent to lapse or surrender an existing policy is a violation of the law. Any written or oral statements used to induce the lapse, termination, exchange, or surrender of an insurance contract based on inaccurate information are prohibited.
Unfair marketing practices
The Division of Insurance is responsible for establishing minimum standards for the full and fair disclosure of policy content. The Division also requires the standardization and simplification of the terms used to describe insurance coverage. Advertising may not involve the following:
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Any implication that policies are approved or that the financial condition of a company is endorsed by any government agency or by any independent group, individual, organization, or society.
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Any statements regarding advertising that are false or untrue in reference to the time frame in which claims are paid.
Gramm-Leach Bliley Act (GLBA)
This law repealed the Glass-Steagall Act of 1933, allowing consolidation of commercial banks, investment institutions, and insurance companies. GLBA established a framework of responsibilities for federal and state regulators for these financial industries. It permits financial services companies to merge and engage in a variety of new business activities, including insurance, while attempting to address the regulatory issues raised by such combinations.
McCarran-Ferguson Act
Federal law signed in 1945 in which Congress declared that the insurance industry would be regulated at the state level. Grants insurers a limited exemption from federal antitrust legislation.
National Association of Insurance commissioners (NAIC)
The U.S. standard-setting and regulatory support organization is created and governed by the chief insurance regulators from the 50 states, the District of Columbia and five U.S. territories. Through the NAIC, state insurance regulators establish standards and best practices, conduct peer review, and coordinate their regulatory oversight. NAIC staff supports these efforts and represents the collective views of state regulators domestically and internationally. NAIC members, together with the central resources of the NAIC, form the national system of state-based insurance regulation in the U.S.
Fair Credit Reporting Act of 1971
The Fair Credit Reporting Act (FCRA) is a federal law that regulates how consumer reporting agencies collect, share, and use personal data. It applies to insurance underwriting when insurers obtain consumer reports such as credit history, MIB files, or investigative consumer reports.
If an insurer takes adverse action, such as denying coverage or charging higher premiums, based on a consumer report, the applicant must be notified within 3 business days. The applicant then has 60 calendar days to request a copy of the report and dispute any incorrect or incomplete information.
Privacy Act of 1974
The Privacy Act of 1974 is a federal law that regulates how U.S. government agencies handle personal information. It applies only to federal agencies, not to private insurance companies.
When an applicant signs an insurance application, they typically give consent for the insurer to access consumer reports such as MIB files, credit reports, and investigative consumer reports. This process is regulated by the Fair Credit Reporting Act, not the Privacy Act.
A signed application generally authorizes the insurer to access this information for up to 30 months. If the report is not obtained within that time, a new authorization must be secured. This rule comes from the Fair Credit Reporting Act.
Telemarketing
The DO NOT CALL registry is a list of telephone numbers, and it is intended to prevent calls from telemarketers. Unsolicited sales calls must be made in accordance with the following provisions:
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No call may be placed outside of the hours of 8 am to 9 pm local time where the call is received.
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The sales nature of the call must be disclosed and the nature of the product/service being offered must be disclosed.
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The caller must identify themselves and the broker/dealer they represent.
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If a prize is being offered, the prize cannot be contingent on purchase.
CAN-Spam
When an unsolicited e-mail is sent the sender must:
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Use the word advertisement or the letters ADV on the subject line.
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Notate the physical location from where the email originated.
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Give the recipient the opportunity to opt out of ever receiving another email from the sender.
MassHealth
Although Medicaid is a federal program, states often use different names for their state-run Medicaid programs. In Massachusetts, Medicaid is called MassHealth. For exam purposes, MassHealth and Medicaid are interchangeable terms.
MassHealth is a state-administered health care program for those in financial need. It is funded by federal and state money.